XML 35 R22.htm IDEA: XBRL DOCUMENT v3.20.4
Business Segment Reporting
 12 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
BUSINESS SEGMENT REPORTING BUSINESS SEGMENT REPORTING
Farmer Mac's operations consist of four operating segments – Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The Institutional Credit segment comprises Farmer Mac's purchases and guarantees of AgVantage securities related to general obligations of lenders that are secured by pools of eligible loans.

Each segment is based on distinct products and distinct business activities.  In addition to these four operating segments, a corporate segment is presented.  That segment represents activity in Farmer Mac's investment portfolio and other corporate activities.   Each operating segment's financial results include directly attributable revenues and expenses.  Corporate charges for administrative expenses not directly attributable to an operating segment are allocated to each segment based on headcount.

Farmer Mac uses the non-GAAP financial measure "core earnings" to measure corporate economic performance and develop financial plans because, in management's view, core earnings is a useful alternative measure in understanding Farmer Mac's economic performance, transaction economics, and business trends.  The main difference between core earnings and net income attributable to common stockholders is that core earnings excludes the effects of fair value fluctuations, which are not expected to have a cumulative net impact on financial condition or results of operations reported in accordance with generally accepted accounting principles if the related financial instruments are held to maturity, as is generally expected. Core earnings also differs from net income attributable to common stockholders by excluding specified infrequent or unusual transactions that Farmer Mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of Farmer Mac's core business. This corporate economic performance measure may not be comparable to similarly labeled measures disclosed by other companies.

Farmer Mac uses net effective spread to measure the net spread Farmer Mac earns between its interest-earning assets and the related net funding costs of these assets. Net effective spread differs from net interest income and net interest yield because it excludes: (1) the amortization of premiums and discounts on assets consolidated at fair value that are amortized as adjustments to yield in interest income over the contractual or estimated remaining lives of the underlying assets; (2) interest income and interest expense related to consolidated trusts with beneficial interests owned by third parties, which are presented on Farmer Mac's consolidated balance sheets as "Loans held for investment in consolidated trusts, at amortized cost"; and (3) the fair value changes of financial derivatives and the corresponding assets or liabilities designated in a fair value hedge accounting relationship.

The financial information presented below reflects the accounts of Farmer Mac and its subsidiaries on a consolidated basis.  Accordingly, the core earnings for Farmer Mac's reportable operating segments will differ from the stand-alone financial statements of Farmer Mac's subsidiaries.  These differences will be due to various factors, including the exclusion of unrealized gains and losses related to fair value changes of trading assets and financial derivatives, as well as the allocation of certain expenses such as dividends and interest expense related to the issuance of capital and the issuance of indebtedness managed at the corporate level.  The allocation of general and administrative expenses that are not directly attributable to an operating segment may also result in differences. 
The following tables present core earnings for Farmer Mac's operating segments and a reconciliation to consolidated net income for the years ended December 31, 2020, 2019, and 2018:

Table 14.1

Core Earnings by Business Segment
For the Year Ended December 31, 2020
Farm & RanchUSDA Guarantees
Rural 
Utilities
Institutional CreditCorporateReconciling
Adjustments		Consolidated Net Income
 (in thousands)
Net interest income$73,901 $19,570 $21,963 $67,953 $7,201 $—  $190,588 
Less: reconciling adjustments(1)(2)(3)
(3,892)2,395 2,734 4,533 598 (6,368)— 
Net effective spread70,009 21,965 24,697 72,486 7,799 (6,368)— 
Guarantee and commitment fees(2)
16,957 850 1,314 29 — (6,601)12,549 
Other income/(expense)(3)
2,556 1,098 32 — (536)604 3,754 
Non-interest income/(loss)19,513 1,948 1,346 29 (536)(5,997)16,303 
Release of losses(2,959)— (4,709)(110)(27)—  (7,805)
Provision for reserve for losses(81)— (169)— — —  (250)
Other non-interest expense(22,414)(7,270)(6,224)(8,784)(16,711)—  (61,403)
Non-interest expense(4)
(22,495)(7,270)(6,393)(8,784)(16,711)—  (61,653)
Core earnings before income taxes64,068 16,643 14,941 63,621 (9,475)(12,365)
(5)
137,433 
Income tax (expense)/benefit(13,454)(3,495)(3,137)(13,361)2,066 2,596 (28,785)
Core earnings before preferred stock dividends 50,614 13,148 11,804 50,260 (7,409)(9,769)
(5)
108,648 
Preferred stock dividends— — — — (17,805)—  (17,805)
Loss on retirement of preferred stock— — — — — (1,667)(1,667)
Segment core earnings/(losses)$50,614 $13,148 $11,804 $50,260 $(25,214)$(11,436)
(5)
$89,176 
Total assets at carrying value$6,305,975 $2,553,176 $2,365,996 $8,128,489 $5,001,865 $—  $24,355,501 
Total on- and off-balance sheet program assets at principal balance$8,581,181 $2,786,718 $2,816,837 $7,739,359 $— $—  $21,924,095 
(1)Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.
(2)Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.
(3)Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "(Losses)/gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.
Core Earnings by Business Segment
For the Year Ended December 31, 2019
Farm & RanchUSDA GuaranteesRural 
Utilities		Institutional CreditCorporate
Reconciling
Adjustments
Consolidated Net Income
 (in thousands)
Net interest income$65,098 $17,470 $10,459 $69,039 $11,069 $—  $173,135 
Less: reconciling adjustments(1)(2)(3)
(9,471)(732)6,143 520 (987)4,527 — 
Net effective spread55,627 16,738 16,602 69,559 10,082 4,527 — 
Guarantee and commitment fees(2)
18,593 958 1,412 372 — (7,669)13,666 
Other income/(expense)(3)
1,397 174 38 — 166 5,501 7,276 
Non-interest income/(loss)19,990 1,132 1,450 372 166 (2,168)20,942 
Provision for loan losses(3,504)— — — — —  (3,504)
Release of reserve for losses3 — — — — —  3 
Other non-interest expense(19,375)(5,757)(3,898)(8,390)(14,505)—  (51,925)
Non-interest expense(4)
(19,372)(5,757)(3,898)(8,390)(14,505)—  (51,922)
Core earnings before income taxes52,741 12,113 14,154 61,541 (4,257)2,359 
(5)
138,651 
Income tax (expense)/benefit(11,076)(2,545)(2,972)(12,924)907 (495)(29,105)
Core earnings before preferred stock dividends41,665 9,568 11,182 48,617 (3,350)1,864 
(5)
109,546 
Preferred stock dividends— — — — (13,940)—  (13,940)
Loss on retirement of preferred stock— — — — — (1,956)(1,956)
Segment core earnings/(losses)$41,665 $9,568 $11,182 $48,617 $(17,290)$(92)
(5)
$93,650 
Total assets at carrying value$5,408,302 $2,311,932 $1,717,405 $8,606,912 $3,664,823 $—  $21,709,374 
Total on- and off-balance sheet program assets at principal balance$7,776,950 $2,620,175 $2,280,571 $8,440,246 $— $—  $21,117,942 
(1)Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.
(2)Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.
(3)Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "(Losses)/gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.
Core Earnings by Business Segment
For the Year Ended December 31, 2018
Farm & RanchUSDA GuaranteesRural 
Utilities		Institutional CreditCorporate
Reconciling
Adjustments
Consolidated Net Income
 (in thousands)
Net interest income$62,951 $20,554 $12,505 $69,321 $9,105 $—  $174,436 
Less: reconciling adjustments(1)(2)(3)
(9,889)(2,499)(922)(7,884)(2,047)23,241 — 
Net effective spread53,062 18,055 11,583 61,437 7,058 23,241 — 
Guarantee and commitment fees(2)
17,976 797 1,599 360 — (6,756)13,976 
Other income/(expense)(3)
1,371 20 33 — (913)(2,747)(2,236)
Non-interest income/(loss)19,347 817 1,632 360 (913)(9,503)11,740 
Provision for loan losses(238)— — — — —  (238)
Release of reserve for losses(97)— — — — —  (97)
Other non-interest expense(19,026)(5,309)(3,062)(8,011)(14,411)—  (49,819)
Non-interest expense(4)
(19,123)(5,309)(3,062)(8,011)(14,411)—  (49,916)
Core earnings before income taxes53,048 13,563 10,153 53,786 (8,266)13,738 
(5)
136,022 
Income tax (expense)/benefit(11,140)(2,848)(2,133)(11,295)2,361 (2,887)(27,942)
Core earnings before preferred stock dividends41,908 10,715 8,020 42,491 (5,905)10,851 
(5)
108,080 
Preferred stock dividends— — — — (13,182)—  (13,182)
Segment core earnings/(losses)$41,908 $10,715 $8,020 $42,491 $(19,087)$10,851 
(5)
$94,898 
Total assets at carrying value$4,701,736 $2,240,906 $945,282 $8,089,410 $2,716,994 $—  $18,694,328 
Total on- and off-balance sheet program assets at principal balance$7,233,972 $2,515,620 $1,592,115 $8,382,817 $— $—  $19,724,524 
(1)Includes the amortization of premiums and discounts on assets consolidated at fair value, originally included in interest income, to reflect core earnings amounts.
(2)Includes the reclassification of interest income and interest expense from consolidated trusts owned by third parties to guarantee and commitment fees, to reflect management's view that the net interest income Farmer Mac earns is effectively a guarantee fee.
(3)Includes the reclassification of interest expense related to interest rate swaps not designated as hedges, which are included in "(Losses)/gains on financial derivatives" on the consolidated financial statements, to determine the effective funding cost for each operating segment.
(4)Includes directly attributable costs and an allocation of indirectly attributable costs based on employee headcount.
(5)Net adjustments to reconcile to the corresponding income measures: core earnings before income taxes reconciled to income before income taxes; core earnings before preferred stock dividends reconciled to net income; and segment core earnings reconciled to net income attributable to common stockholders.